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For the first time in at least a decade, Indian companies are choosing bonds over loans to borrow overseas as they line up to tap demand for the nation’s debt. Businesses sold $8.9 billion of notes in seven months through July, 63 percent more from a year earlier, even as syndicated loans fell 45 percent to $7.8 billion, data compiled by Bloomberg show.

One of the fastest growth rates in the world and Prime Minister Narendra Modi’s economic policies have attracted global funds to India, reducing costs for issuers. The yield premium Indian companies must pay over equivalent U.S. Treasuries to sell dollar bonds has averaged 229 basis points this year, the tightest spread since 2007, JPMorgan Chase & Co. indexes show.

“As spreads for these bonds have been tightening, new issuers are tapping the international market and old issuers are accessing it more actively,” Jujhar Singh, head of capital markets for South Asia at Standard Chartered Plc in Singapore, said in an interview. Issuance may exceed the 2014 peak of $19.7 billion if the bond market stays buoyant for rest of the year, he said.

The appetite for India’s corporate debt is so strong that Hindustan Petroleum’s $500 million offering in July attracted bids for six times the amount. Adani Ports & Special Economic Zone Ltd., which runs the nation’s largest port, sold dollar bonds twice this year to repay existing loans and fund projects, according to its latest annual report.

Billionaire Anil Agarwal’s Vedanta sold seven-year dollar notes, a second $1 billion issuance by the resources company this year.

Last month’s ruling by the market regulator to halt sales of Masala bonds -- debt in rupees issued outside India -- will likely drive up foreign currency issuance, said Raymond Chia, head of credit research for Asia ex-Japan at Schroder Investment Management Ltd. in Singapore.

“I expect more Indian companies to start rethinking their funding strategies in foreign currency,” he said.

Cheaper Option

Raising money by selling bonds is currently cheaper than loans, according to J. Ramaswamy, director of finance at Hindustan Petroleum. For instance, the margin paid over benchmark rates on non-rupee loans has averaged 203 basis points this year, up from 194 basis points in 2016.

HPCL needs about 100 billion rupees for projects and working capital needs, and the longer-duration notes help the refiner better plan cash flows, said Ramaswamy. Bonds will remain the security of choice for companies amid strong demand for them, analysts say.

Foreigners raised holdings of local government and corporate debt by 203 billion rupees in July -- a sixth month of inflows -- lifting this year’s total purchases to 1.4 trillion rupees, data compiled by Bloomberg show.

While flows into emerging-market debt remains strong, India “has been an outperformer given the perception about reforms that are taking place and political stability,” Standard Chartered’s Singh said.